TMI Blog1970 (4) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... ls are brought by certificate from the judgment of the Calcutta High Court dated February 17, 1964, in Income tax Reference No. 94 of 1960. The assessment years are 1948-49 and 1949-50 and the corresponding accounting years ended on March 31, 1948, and March 31, 1949, respectively. The appellant (hereinafter called "the assessee") is a company limited by shares. In the general meetings of the shareholders for the respective accounting years no dividends were declared, although sufficient profits were available for distribution. It was urged before the Income-tax Officer that it was a company in which "the public were substantially interested" within the meaning of the third proviso to section 23A(1) of the Income-tax Act, 1922, read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the shares of the assessee were actually the subject of dealings in any stock exchange in the course of the relevant previous years. An official bulletin of the Calcutta Stock Exchange in which the shares were quoted was produced. But the quotations given therein did not convince the Tribunal as the shareholding of the beneficial owners remained unaltered. This indicated that there was an absence of any dealing in shares by the beneficial owners. The Tribunal also found that the assessee did not satisfy the other condition regarding the free transferability of its shares as article 13 of the articles of association of the assessee laid down that the directors may refuse to register any transfer of a share and may also "veto any transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner an order in writing that the undistributed portion of the assessable income of the company of that previous year as computed for income-tax purposes and reduced by the amount of income-tax and super-tax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the shareholders as at the date of the general meeting aforesaid, and thereupon the proportionate share thereof of each shareholder shall be included in the total income of such shareholder for the purpose of assessing his total income : .... Provided further that this sub-section shall not apply to any company in which the public are substantially interested or to a subsidiary company of such a company if the whole of the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assigning any reason." On behalf of the appellant the argument of Mr. Chagla was that the High Court was not right in holding that article 13 was restrictive in nature but was only a procedural formality for the purpose of transferring the shares and did not affect the fundamental nature of the transferability of the shares. In support of this contention reliance was placed on a decision of the Madras High Court in East India Corporation Ltd. v. Commissioner of Income-tax in which it was held that the mere fact that an absolute discretion was vested in the board of directors to refuse to register the transfer of shares in a given case could not by itself lead to the inference that the shares were not in fact freely transferable. The oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subject of dealings in the stock exchange in the previous years concerned." For a satisfactory decision of this case it is necessary for us to know (1) whether the shares were quoted in the Calcutta Stock Exchange in the "cash section" or the "forward section", (2) whether the heading of the bulletin of the Calcutta Stock Exchange represents the actual transactions which have already taken place, (3) whether there was any fluctuation in the price of shares, and (4) the number of quotations in the two years of account. We, accordingly, direct the Income-tax Appellate Tribunal to furnish a supplementary statement of the case under section 66(4) of the Act on the points mentioned above. In submitting its supplementary statement the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25% of the voting power must have been allotted unconditionally to or acquired unconditionally by the public, and (2)(a) that any such shares have in the course of the previous year been the subject of dealings on any stock-exchange, or (b) that the shares are in fact freely transferable by the holders to other members of the public. It is common ground that condition (1) is satisfied in this case in respect of condition (2), there was controversy and this court by order dated February 11, 1969, directed the Income-tax Appellate Tribunal to submit a supplementary statement of case on the following four points : (i) whether the shares were quoted in the Calcutta Stock Exchange in the "cash section" or the "forward section" ; (ii) w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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